India services sector growth stalls in October

Our Bureau Mumbai | Updated on November 05, 2014

The HSBC PMI, compiled by Markit, fell to 50.0 in October from September's 51.6, the lowest in six months and right on the break-even point between growth and contraction.

HSBC India Services PMI Business Activity Index, tracking changes in activity at Indian services companies on a month-by-month basis, fell to a six-month low to exactly 50 in October from September’s 51.6.

Backlogs of work at service sector firms in India accumulated at the quickest rate in three months during October. Indian manufacturers also reported a rise in backlogs, causing volumes of work-in-hand across the private sector to rise at a solid pace. Continuing the trend observed throughout the past 67 months, input prices faced by Indian services companies rose in October,” HSBC said in a report.

However, the rate of cost inflation was unchanged from September and was the joint-weakest since November 2009. Likewise, cost pressures at manufacturers eased to the mildest in 17 months.

The headline HSBC India Composite PMI Output Index was down at 51.0, down from 51.8, consistent with a moderate expansion in private sector activity in October.

“The latest figure indicated that growth of private sector output in India eased to the weakest in five months. Business activity at service providers stagnated during the month, while manufacturers reported an accelerated expansion in output,” the report said.

Overall, private sector input costs rose at the slowest pace in the current 67-month period of inflation. Average selling prices set by Indian service providers also increased in October, marking a four-year period of charge inflation.

That said, the rate of inflation was slight overall and muted in comparison with historical data. Similarly, output prices in the manufacturing sector increased at a marginal pace.

As a result, the rate of private sector charge inflation remained historically weak. October data indicated that service sector firms in India remained highly optimistic regarding prospects for activity growth in the coming year.

Business sentiment was the strongest in three months, with panellists commenting on anticipated improvements in demand and new marketing initiatives as key sources of optimism.

The latest reading indicated stagnation in business activity, following five successive months of growth. Anecdotal evidence linked variations in activity to changes in order book volumes.

Among the monitored sub-sectors, the best-performing was Post & Telecommunications, whereas activity fell quickest in Hotels & Restaurants. Underpinning the stagnation in activity was weaker growth of new business. Despite rising for the sixth consecutive month, new work intakes in the Indian service sector increased at the weakest pace since May during October, the report added.

Meanwhile, new order growth at manufacturers picked up to a solid rate. Consequently, new business across the private sector as a whole rose for the sixth month running. Growth of employment in the Indian service sector also slowed in October. The rate of job creation was marginal overall and weaker than the long-run series average.

Hiring at service providers led to a fractional expansion in private sector employment, as workforce numbers were broadly unchanged in the manufacturing industry.

Published on November 05, 2014

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